Correlation Between Brill Shoe and Brimag L

Can any of the company-specific risk be diversified away by investing in both Brill Shoe and Brimag L at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Brill Shoe and Brimag L into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brill Shoe Industries and Brimag L, you can compare the effects of market volatilities on Brill Shoe and Brimag L and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Brill Shoe with a short position of Brimag L. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brill Shoe and Brimag L.

Diversification Opportunities for Brill Shoe and Brimag L

0.85

Correlation Coefficient

Brill Shoe  Brimag L

Very poor diversification

The 3 months correlation between Brill and Brimag is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Brill Shoe Industries and Brimag L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brimag L and Brill Shoe is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Brill Shoe Industries are associated (or correlated) with Brimag L. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brimag L has no effect on the direction of Brill Shoe i.e., Brill Shoe and Brimag L go up and down completely randomly.

Pair Corralation between Brill Shoe and Brimag L

Assuming the 90 days trading horizon Brill Shoe Industries is expected to generate 2.47 times more return on investment than Brimag L. However, Brill Shoe is 2.47 times more volatile than Brimag L. It trades about 0.22 of its potential returns per unit of risk. Brimag L is currently generating about 0.21 per unit of risk. If you would invest  139,000  in Brill Shoe Industries on September 3, 2024 and sell it today you would earn a total of  58,500  from holding Brill Shoe Industries or generate 42.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Brill Shoe Industries  vs.  Brimag L

Brill Shoe Industries

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brill Shoe Industries are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brill Shoe sustained solid returns over the last few months and may actually be approaching a breakup point.

Brimag L

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brimag L are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brimag L sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brill Shoe and Brimag L

The main advantage of trading using opposite Brill Shoe and Brimag L positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brill Shoe position performs unexpectedly, Brimag L can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Brimag L will offset losses from the drop in Brimag L's long position.

The idea behind Brill Shoe Industries and Brimag L pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .